How do home loan repayment calculators work?

Before we talk home loan repayment calculators, let’s first clarify what home loan repayments are. 

Home loan repayments are the amounts of money a person pays to their lender, periodically over an agreed timeframe, to repay their mortgage. Every person’s home loan repayments will be different as they have a unique loan amount, loan term and interest rate. It’s possible to make additional repayments to pay off the loan sooner and save on interest.

Based on the information you input into a home loan repayment calculator, it can spit out several calculations. These include: 

• How much your estimated repayments will be (weekly, fortnightly or monthly)
• The total cost of your home loan
• How much interest you’ll be paying over the life of your loan
• How long it will take to pay off your home loan. 

Some repayment calculators also calculate the: 

• Cost of fees
• Effects of making extra repayments (regularly or as a lump sum)
• Effects on the loan’s total cost by switching to interest-only repayments for a limited time.

As well as laying out financial figures for you, you can also use home loan repayment calculators to work out how much you can afford to borrow.

Every home loan repayment calculator is unique but you can typically get results by taking the following steps: 

1. Enter your loan amount e.g. $350,000
2. Enter your loan term e.g. 30 years
3. Enter your preferred interest rate e.g. 2.54%
4. Select your repayment type (principal and interest or interest only)
5. Select a repayment frequency (weekly, fortnightly, monthly)
6. Select the loan type (owner-occupier or investment).

Keep in mind that these calculations don’t include the cost of fees and other charges that you may have to pay as part of your home loan. They also assume that the mortgage interest rate will remain the same over the home loan’s full term, whereas, in reality, changes to variable interest rates could affect the cost of your repayments.

Beyond how much you’ll have to pay, there are other things you should consider before taking out a home loan. It may be wise to ensure that: 

• Your loan repayments don’t take up more of your income than you can manage (you need to make sure you can meet your repayments as well as all your other financial obligations)
• You allow for an approximate 2 per cent interest rate increase when calculating how much you can afford to make in repayments, so you know you’ll likely be covered if you need to start paying more
• You’ve saved a deposit and can demonstrate a savings history over a three- to six-month period
• You can provide financial documents, such as pay slips, bank statements, bills, and rental receipts
• You’re informed about all associated fees, charges and ongoing costs
• You’re aware of extra costs such as mortgage insurance and stamp duty
• You understand the product disclosure statement.

Start off on the right foot by visiting RateCity’s home loan comparison and mortgage repayment calculator tools.